1. This writ petition is filed by the petitioner, a fully owned Government company, seeking to quash Exts.P2 and P3 orders passed by the 2nd respondent, i.e., the Superintending Engineer, Irrigation Department, Piravom, Ernakulam District, whereby the work was terminated at the risk and cost of the contractor and directed to remit 30% of the cost of the remaining works at agreed rate of the contract within three months from the date of the order, and accordingly quantifying the same at Rs. 45,70,000/-, as per Ext.P3 order. Brief material facts for the disposal of the writ petition are as follows:
2. Petitioner is a Company fully owned and controlled by the State Government. The construction of 'flush escape and leading channel at Ch.16360m of main canal' of Idamalayar Irrigation Project was awarded to the petitioner as per Ext.P1 work order. The Probable Amount of Contract was Rs. 2,76,20,780/-, and the time of completion was 24 months from the date of handing over the site. According to the petitioner, there was delay on the part of the respondents in approving and disbursing the part bills, and the 1st part bill was released only on 01.08.2013, i.e., after 16 months. Time was also extended and the same was finally extended up to 31.12.2014 by imposing a penalty of Rs. 78,000/-. It is the case of the petitioner that, 2nd part bill has not been prepared for the remaining work, and the works amounting to Rs. 75,00,000/- has been completed. However, the requests for further extension of time for completion of work was turned down by the 2nd respondent as per Ext.P1, and terminated the contract at the risk and cost of the petitioner and directed to make the payment as specified above.
3. It is also pointed out that, the 2nd respondent also wrote letters to all Superintending Engineers under the Irrigation, Public Works, Local Self Government and Harbour Engineering, Departments on 13.08.2015, requesting to withhold payments if any due to the petitioner Corporation, evident from Exts.P4 and P4(a). Thus, on the basis of the request of the 2nd respondent, respondents 4 and 5 had withheld the amounts due to the petitioner in connection with the execution of the work viz., “MI-Class I construction of check dam-cum-cross way across Manimala River at Karimbukayam in Kanjirappally Taluk”. It is also submitted that, the 2nd respondent issued Exts.P3 and P4 when value of the remaining work executed by the petitioner in respect of the concerned work is withheld, and no bill has been prepared for the same so far. It is contended that the 2nd respondent has no authority or power to unilaterally assess damages arising out of the alleged contract, and it is well settled that a party to the agreement cannot be an arbiter for his own cause. That apart, it is pointed out that, the action of the 2nd respondent is against the dictum laid down by the apex court in 'State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli' [AIR 1987 SC 1359] and Ext.P12 judgment rendered by this Court in W.P.(C) No.30243 of 2009 dated 22.08.2014. These are the basic background facts put forth by the petitioner in this writ petition.
4. The 3rd respondent has filed a detailed counter affidavit, justifying the stand adopted by it and stating that, petitioner did not adhere to the conditions of the contract and complete the work in accordance with the time table agreed upon by and between the parties. It is also contended that, the physical progress of the work from the beginning stage itself was very poor, evident from the fact that CC 1st & Part Bill was received only on 26.02.2013, just after the expiry of 4th quarter from the date of handing over the site, for an amount of Rs. 83,71,113/- i.e., up to 30% and it was paid to the petitioner on 01.08.2013 on seniority basis. In spite of receipt of the payment, petitioner dragged the work and submitted application for extension of time for completion, which had been granted up to 31.12.2014 on imposition of penalty as specified above. However, in spite of extension of time, petitioner failed to perform the contractual obligations and in spite of the earnest efforts made by the respondents, petitioner did not resume the work, and no reasons are assigned in order to stop the work.
5. It is also pointed out that, petitioner failed to submit the CC IInd & Part Bill in respect of the work carried out, and it was the duty of the petitioner to submit the work bills in consultation with the Assistant Engineer in charge. Soon after termination of the contract, all Superintending Engineers under the Irrigation, Public Works Department etc. etc. have been directed to withhold payment due to the petitioner to realize the loss sustained to the Government for rearrangement of the balance work as per letter No.D5- 920/09 dated 13.08.2015. That apart, it is submitted that, the action of the 3rd respondent is quite transparent as evident from the agreement executed by and between the parties to complete the work within the time schedule agreed upon. It is also submitted that, all actions have been taken after affording ample opportunities to the firm and following the principles of natural justice and agreement conditions.
6. That apart, it is stated that the closing measurements and final level of the work have been taken on 30.09.2015 and 13.10.2015 in the presence of the officials of the petitioner, and copies of the pages of Measurement Books were furnished to them by the Assistant Executive Engineer concerned. The fixation of initial liability has been duly intimated to the petitioner with statement, and therefore, the step taken by the Department is just and proper, and the allegations contained in the writ petition contrary to the same, cannot be sustained under law. Accordingly, it is contended that, petitioner is liable to pay the damages suffered by the State Government.
7. The 3rd respondent has also filed an additional counter affidavit, stating that the balance work has been re-arranged through another contractor and the same is completed successfully, and also pointing out that, on closing the final levels, some quantities varied and as a result, the final liability is fixed at Rs.36,33,544/-, and the said loss has been suffered by the State Government due to inaction on the part of the petitioner. Therefore, after making adjustments of amounts due to the petitioner as per the CC 2nd & final bill, petitioner is entitled to receive an amount of Rs.4,58,043/-.
8. I have heard learned counsel for the petitioner and the learned Government Pleader and perused the pleadings and the documents on record.
9. The paramount contention advanced by learned counsel for the petitioner is that, the 2nd respondent has no authority to fix damages, since the 2nd respondent is one of the parties to the contract. In order to canvass the said proposition, learned counsel is relying upon the judgment of the apex court in 'Shree Rameshwara Rice Mills' (supra). However, in my considered view, there, the challenge was with respect to termination of the contract, which was the issue considered and adjudicated in the said judgment. Paragraphs 7 and 8 of the said judgment are relevant to the context, which read thus:
“7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr. Iyengar. The terms of Clause 12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are "and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If it was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the other party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the Officer of the State, even though a party to the contract will be well within his rights in assessing the damages by the breach in view of the specific terms of clause 12.
8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed”.
10. Even though petitioner has challenged the authority of the 2nd respondent to fix the damages, on a perusal of the Notice Inviting Tender for the work in question issued by the Kerala Water Resources Department, made available at the time of hearing by the learned Government Pleader, which is made part of the records, there is power vested with the 3rd respondent, i.e., the Executive Engineer to quantify damages. Paragraphs 54 to 56 are relevant to the context, which read thus:
“54. The date fixed by the Superintending Engineer /Executive Engineer for the commencement and completion of works, as entered in this agreement shall be strictly observed by the contractor who shall pay damages at the rates of one (1) percent on the estimated value of the contract for every day not exceeding five days that work remains uncommenced or unfinished, after the proper date and further to ensure good progress during the execution of works the contractor shall be bound unless the contract provides otherwise in all case in which the time allowed for a work exceed one month to complete. One-fourth of the whole work to be done when onefourth of the whole time allowed for it has elapsed, one-half of the work when one half of time has elapsed and three fourths of work when three fourth of time has elapsed and the penalty for the failure in either of these cases shall like wise be that the contractor shall be subject to pay daily damage at the rate of one (1) percent on the estimated value of the amount of work that should be completed by that time. Provided always that entire amount of damages to be paid under the provision of this clause shall not exceed in the whole amount of retention plus the security deposit. All damages payable under the provision of this clause or clause 12 of the conditions of contract shall be considered as liquidated damages to be applied to the use of this Government without reference to the actual loss sustained owing to the delay.
55. It is to be expressly understood that the measurement of work is to be taken net (notwithstanding any customs or practice to the contrary) according to actual quantities when in place and finished according to drawings or as may be ordered from time to time by the Executive Engineer and the cost calculated by measurements or weight at the respective places without any additional charges for any necessary or contingent works connected therewith. The rates to be quoted are for works in site and complete in every respect.
56. The Executive Engineer shall also have power to measure up to work to the contractor and to take such part thereof as shall be unexecuted out of his hands and to give it to another contractor to complete in which case, any expense which may be incurred in excess of the sum which would have been paid to the original contractor if the whole work has been executed by him (the amount of which excess, the certificates in writing of the Divisional Officer shall be final and conclusive) be borne and paid by the originate contractor and may be deducted from any money due to him by Government under the contract or otherwise from his security deposit of the proceeds of sale thereof or sufficient part thereof.”
Therefore, it is clear that petitioner participated in the bidding process fully aware of the fact that the 3rd respondent is vested with powers to fix damages in the event of failure on the part of the petitioner to execute the contract in terms of the agreement. True, the said power cannot be enjoyed, for adjudicating any issue with respect to termination of contract, if the termination is under challenge. Now the issue boils down to just one aspect, as to whether the termination of contract is under challenge.
11. In this context, my considered view is that, the judgment in 'Shree Rameshwara Rice Mills' (supra) will not come to the rescue of the petitioner, since the termination of the contract by the respondents is not under dispute in this writ petition. The reliefs sought for by the petitioner are relevant to consider that question, which read thus:
“(i) To issue a declaration that it is illegal, arbitrary and discriminatory on the part of the 2nd respondent in unilaterally fixing alleged loss sustained to the Department including initial risk and cost liability as the petitioner has not admitted the breach of contract and that the act of the 2nd respondent in fixing liability on the petitioner on allegation of sustaining loss in connection with non-completion of work covered in Ext.P1 is illegal, arbitrary, without any bonafide and against the dictum laid down by the Hon'ble Apex Court, reported in AIR 1987 SC 1359 and Ext.P12 judgment of this Hon'ble Court;
(ii) To issue a writ of certiorari or any other appropriate writ or order, call for the records leading upto Ext.P12 and quash Ext.P2 and P3 orders of the 2nd respondent in unilaterally fixing liability on the petitioner on allegation of sustaining loss in connection with noncompletion of work covered in Ext.P1;
(iii)To issue a further declaration that the act of the 2nd respondent in requesting the Superintendent Engineers of the Various Departments in the State as evidenced by Ext.P4 and Ext.P4(a), requesting to withhold all the amounts due to the petitioner is illegal, arbitrary and without any bonafide;
(iv) To issue a writ of certiorari or any other appropriate writ or order, and quash Ext.P4, Ext.P4(a) and Ext.P5 of the 2nd respondent and all further proceedings pursuant thereto;
(v) To issue a writ of mandamus or any other appropriate writ, order or direction, directing the 2nd and 3rd respondent to prepare bill in respect to the balance work done by the petitioner (after the 1st and part bill) in connection with Ext.P1 work order and disburse the same to the petitioner forthwith; and
(vi) To issue such other further reliefs as this Honourable Court may deem fit and proper in the facts and circumstances of this case.”
12. Therefore, on a fair appreciation of the reliefs, it is clear that what is under challenge is only the unilateral fixation of the liability by the 2nd respondent against the petitioner. However, it is clear from the judgment of the apex court in 'Shree Rameshwara Rice Mills' case (supra), that, if termination is not disputed, then, if the authority is left with powers under the contract to quantify the damages, it can be done by the said authority, since it is only a consequential action.
13. Same is the issue considered by a Full Bench of this Court in 'Abdul Rahiman v. Divisional Forest Officer' [1988 (2) KLT 290 (F.B.)], wherein, it is held that, where the breach of the contract is admitted, i.e., when there is no dispute that the contract has been broken by one of the parties, the Government as the party entitled to claim compensation for the breach need not wait for a determination by any outside agency as to whether there was any breach of contract, and in that event, the question of damages alone remains to be considered. It was also held that, if liquidated damages is provided in the contract, in the event of breach, and the Gover
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nment claiming that amount as compensation for the admitted breach committed by the other party to the contract, need not seek the aid of court or any outside agency for the fixation of the quantum of damages, and similarly, if the contract itself provides that one party shall be liable to pay damages to the other party, as may be assessed by the other party to the contract, the assessment so made in case the breach is admitted, is binding on the first party and there is no more any necessity for a further quantification of the damages by any outside agency. It was further held that the party assessing the damage can straight-away seek to recover the amount and if that party is the Government, it can have recourse to the remedy available under the Kerala Revenue Recovery Act. 14. In my considered view, after going through the entire pleadings in the writ petition and the reliefs sought for, it is clear that, what is questioned is the authority of the 2nd respondent to unilaterally assess the damages arising out of the contract, and it was on the basis of the said sole contention, petitioner relied upon the principles of law laid down by the apex court in 'Shree Rameshwara Rice Mills' (supra). 15. On evaluation of the rival submissions made across the Bar and the clear position of law discussed above, I am of the considered view, since there is no challenge or dispute made to the termination of the contract, and the question raised is only in respect of quantum of damages fixed by the 2nd respondent in accordance with the stipulations contained in the Notice Inviting Tender, petitioner is not entitled to get any relief as is sought for in the writ petition, there being no arbitrariness or illegality, liable to be interfered with by this Court under Article 226 of the Constitution of India. Resultantly, writ petition fails, and accordingly it is dismissed.